Brean Capital analyst Difei Yang weighed in with some insights on Zogenix, Inc. (NASDAQ:ZGNX) ahead of the vote to approve a reverse stock split of outstanding common stock at an exchange ratio of 1-for-8, and a change in the number of authorized shares of common stock to 50,000,000 shares. The voting will be casted on June 18, 2015, at the company’s annual stockholder meeting in San Diego. The analyst reiterated a Buy rating on the stock with a price target of $2.50.
Yang wrote, “We view the pending 1 for 8 reverse stock split positively for the share price and believe it may close the valuation gap, between Zogenix and its peer group, quicker than otherwise by attracting a wider institutional investor base. Our fundamental investment thesis has not changed, i.e., we view the company as having a higher-than-average probability in successfully developing ZGX008 as a treatment for Dravet syndrome, which is a debilitating orphan disease.”
Further, “While the reverse split itself does not generate value on a fundamental basis, it may bring more visibility and attract additional institutional investors to the stock and thus close the valuation gap of Zogenix and its peers which we view as a positive to the share price. Upon approval, we believe the company is likely to implement the reverse split expeditiously.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Difei Yang has a total average return of 18.0% and a 72.2% success rate. Yang has a 20.0% average return when recommending ZGNX, and is ranked #277 out of 3623 analysts.
Out of the 4 analysts polled by TipRanks, 3 rate Zogenix stock a Buy, while 1 rates the stock a Hold. With a return potential of 77.1%, the stock’s consensus target price stands at $2.83.